How $PLTR will displace $CRM and 4x market cap in 5 years
Salesforce ($CRM) market cap is $252.81 B
Palantir ($PLTR) market cap is $69.39 B
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Me at AIP Bootcamp learning Palantir's Foundry platform
If you're in the tech industry you'd have to have blinders on to not see the tectonic shifts taking place. Billion dollar swings hanging on every word of an earnings call, massive layoffs hitting both giants and startups - with all stages of VC drying up for anything without the 'AI' or 'ML' suffix.
Over the past year I've delved deep into Palantir's world, learning their Foundry platform, attending one of their bootcamps and meeting 50+ of their existing customers at 4 AIPCon.
This journey has given me an unique look at how the Foundry platform is paving the way for a revolutionary shift in enterprise software.
Listening to an infamous Karp philosophy lesson
I've been coding businesses software for over 12 years, and the shift of LLMs has drastically changed how I look at software development. For $20 a month you now get a senior programmer sidekick 24/7/365, who only needs existing expertise and some product minded prompting to truly help you build anything imaginable in the world of software.
To think that the current approach will remain undisrupted, paying programmers hundreds of thousands a year to hand-code solutions for your businesses with the traditional software development life cycle is naive at best, as intermediate programmer skills essentially become a commodity.
The highest value work that the market will start paying top dollar for will be in effectively harnessing large language models, not to aid in legacy coding practices, but to build them into practical business applications that can be measured at the bottom line.
That's ultimately where Foundry differentiates itself from just another SaaS tool in the Enterprise stack – it's a comprehensive development and compute abstraction layer that I predict will start to compete with all major ERPs and CRMs in the coming years.
"What cloud did for infra is what $PLTR is doing for backend services." - @chadwahl
A perfect blend of the scalable, managed open-source that AWS offers, paired with the framework for application development and command center operations that Salesforce provides their customers.
Wrap this all up in military-grade security, with uptime capabilities forged in literal battlefield conditions, and you've got a compelling proposition that's hard to ignore in the enterprise market.
So let's unpack why I think Palantir Technologies ($PLTR) is the obvious disruptor coming for Salesforce ($CRM);
It's no surprise to me though, that this is not yet common knowledge around the software industry and investors.
SFDC's ~ $250 B market cap currently overshadows Palantir's ~$70 B, and many, including our beloved @jimcramer, have struggled to grasp what it is that Palantir even does;
"I find it very tough to understand what they do for the government."
.. only highlighting Palantir's complex and historically secretive nature.
However, on May 16th, Palantir made a game-changing, almost clandestine, move and opened their Foundry platform to a SaaS signup process with pay as you go billing, a massive development long advocated by Foundry advocates like @CodeStrap411 for years, also coinciding with the release of their AI process building framework AIP.
Introducing Build with AIP, a curated library of reference examples, tutorials, and starter kits designed to turbocharge application building - @palantirtech https://twitter.com/PalantirTech/status/1791173016942268855
For the first time - individual developers can sign up for Foundry and start developing production grade use cases in what was historically an exorbitantly expensive, white gloved software only used by governments, agencies, and multinational corporations ready for a price tag starting in the upper millions.
However, in the last few years it's become clear their team has done an immense amount of work to build in the abstractions needed to let folks self-service into Foundry.
Their CTO @ssankar talks openly about this strategy in his Feb 2023 talk titled "Your Business as Code", describing how Foundry can be the SDK (Software Development Kit) of the enterprise.
CTO Shyam Sankar talk about changing from a "walled garden" to an open platform
Ontology: Your Business As Code | CTO Shyam Sankar
To truly grasp Palantir's position we need to dive deeper into @ssankar homage to displacing the great and powerful "Amazon Web Services".
Over the past 18 years, AWS has revolutionized the industry by bringing data-center scale computing to developers worldwide and creating a platform for integrating the best open-source software to manage enterprise tech infrastructure.
over 200 global, on-demand, pay-as-you-go cloud services for compute, storage, databases, networking... best place for customers to build & run open source software in the cloud'- AWS
It's clear to track the timeline of modern open source release tracking AWS's scale to 90B+ in revenue for their cloud compute & offering of the world's best open source managed services.
Pivotal OSS releases dates x AWS revenue milestones
Understanding what Open Source did for AWS, let's pivot to $CRM which I think of on the other end of the enterprise software spectrum;
The "Walled Garden"
While AWS's genius was in creating a platform that supported the unencumbered use of managed open-source technologies, Salesforce took a different approach and built up an end-to-end solution for sales and operations staff to log into in the morning, and clock out of at night.
Salesforce was founded in 1999 (AWS in 2006), but it wasn't until 2015 that the cloud computing boom enabled AWS's revenue to surpass that of the first household name in SaaS, Salesforce.
AWS x SF revenue timeline
So over the years of organic growth of customers needing unique customizations, Salesforce strategy pursued another important investment of democratization of training 'citizen developers' who could self-service build in their incredibly powerful, yet complex 'walled garden' ecosystem, to meet the needs of even the largest enterprises.
Ecosystem has 15M people involved in Salesforce's community who work as end users, in consultancies, and for app companies. The Salesforce economy is also predicted to generate revenues of six times that of Salesforce by 2026 - @SalesforceBen
People (just like Ben here) have built entire careers around the APEX programming language Salesforce developed, and the ecosystem that was created now has nearly 6x revenue of the core business.
It's the ecosystem crown jewel nearly every SaaS wants to emulate.
However.. As powerful as @AWS and @Salesforce offerings are, the sprawling complexity that can evolve in both these systems requires massive IT investment to orchestrate it effectively at scale, requiring heavy-hitting engineering talent team simply to navigate the AWS or Salesforce ecosystems to stitch together solutions from their vast array of services.
They've recognized an opportunity to create a best-in-class Enterprise Operating System that combines the strengths of both AWS and Salesforce.
Palantir's Foundry platform abstracts away much of the complexity that companies currently grapple with in the AWS ecosystem, built on the world's best open source software that you will spend millions to develop & maintain with your own engineering teams.
Foundry isn't just another tool in the stack – it's a comprehensive abstraction layer that can compete with major ERPs and CRMs. It offers the customizability and power of AWS's infrastructure with the user-friendliness and business focus of Salesforce's applications.
Foundry's backend stack is basically all the best open source tools abstracted in a way that engineers or even savvy business users can leverage without having to have a PHD in AWS.
My best attempt to reverse engineer Foundry's core data stack
If you were to rebuild Foundry's 40 native 'Applications' with a AWS managed services equivalent, you're looking at 10's of millions in just developer salaries to build & maintain.
My research on: Foundry Services and AWS equivalent
This doesn't mean AWS loses out. Compute using hyperscalers data centers will continue to benefit, especially as workloads from LLMs actually start to deliver dollar values for businesses who can harness them.
In essence, @PalantirTech is building on the foundations laid by AWS and open-source technologies, creating a new paradigm for enterprise software that's poised to redefine the industry. As we've seen with AWS's growth trajectory, the potential for rapid expansion in this space is immense – which is why a 4x increase in Palantir's market cap isn't just possible, but could be just the beginning.
What cloud did for infra is what $PLTR is doing for backend services. - @chadwahl
So to all the folks confused on what this company actually does, hopefully this helps demystify a bit, and getting back to my thesis how $PLTR could eclipse $CRM market cap in the next 5 years..
Revenue projects assuming the following assertions
- Palantir Revenue Growth: 40% Year-over-Year (YoY) for 5 years
- Palantir Price to Sales Ratio: Increases from 15 to 18 over 5 years
- Palantir's starting revenue (2024): $4.62B (based on P/S ratio of 15)
- Salesforce Revenue Growth: 10% YoY for 5 years
- Salesforce P/S Ratio: Decreases from 6 to 5 over 5 years Salesforce's starting revenue (2024): $42.13B (based on P/S ratio of 6)
To my $PLTR army friends, (@arny_trezzi & @amitisinvesting) any massive holes in my bullish crystal ball?
The AI Elephant
Foundry and its Ontology already stand alone in reshaping how we abstract AWS and low-code Salesforce, but how will humans actually capitalize on AI in business value?
Even with the tidal wave of LLM capabilities solo entrepreneurs and indie-hackers are capable of (just checkout @levelsio or @mckaywrigley to get a taste), displacing enterprise software will be a different beast. It will continue to resist disruption by lone innovators, not just due to its complexity but because of stringent regulatory requirements like SOC 1/2, Sarbanes-Oxley, GDPR, and HIPAA compliance needs.
I don't think the future of enterprise software is a magical AGI that instantly solves all problems. Instead, it's about strategic AI integration that empowers millions of existing human workers to leverage personal insights of their business operations with unbelievable human efficiency.
Andreessen Horowitz really said it best;
We believe AI will so fundamentally reimagine the core system of record and the sales workflows that no incumbent is safe @zeyalater @mandrusko1 @astrange
The key is building AI into the foundational level of your business, not just bolting on LLMs to help you find that with corporate search for that damn Jira ticket, or Slack thread that you can only recall a keyword from.
Many organizations are attempting to cobble together their own solutions, resulting in a Frankenstein's monster of open-source tools and SaaS offerings, juggling data integrations, warehouses, observability, machine learning, BI tools, and managed language models.
From @SnowflakeDB to @databricks, from AWS Glue to SageMaker, the components are all out there!
However the ability to architect, orchestrate, deploy, monitor, and operate a system that combines all these deep software engineering concepts—and does so efficiently enough to actually bring value to your business—is mind-bogglingly complex.
Remember when micro-services were going to solve all our problems? Yeah, about that. We've ended up with a tangled web of services that's far too complex for humans (or A.I.) to navigate. This complexity isn't just a headache—it's burning a massive hole in balance sheets.
"We're witnessing a trillion-dollar time bomb in the AI space" - AI's trillion dollar time bomb
So, where does this leave us? In dire need of a cohesive, efficient, and value-driven enterprise data platform—an operating system for the AI age.
Wrapping it all up, with a mentor that has led me down the rabbit hole in his decades long career in building these systems in AWS is Dorian Smiley, better known on the web as @CodeStrap411
AIP will be gateway drug for the Ontology. The number of AI tools the Ontology can enable is insane: Geospatial, time series, graphs, search, write back, actions. AIP amplifies the value of these tools to absurd levels
https://twitter.com/CodeStrap411/status/1664682466576039948
So while we are only at the beginning of this new frontier, I am truly inspired by what the group of innovative leaders has been able to achieve with Alex Karp at the helm.
I started this journey with the hook of how Palantir could 4x its market cap and eclipse Salesforce in 5 years, but as i've peeled the layers back, from financial projections to the transformative power of AI, a more profound question emerges:
Could Palantir be pioneering a new category of software altogether that transcends the acronym-led CRMs and ERPs to redefine business operations?
To me, the answer is obvious. What do you think?
Tolkien's Palantiri Seeing Stones